COULD HSBC Holdings be Hong Kong's first $100 stock? Next year's earnings growth for HSBC is increasingly encouraging, and analysts who predict a short term share price of $85 say it is not unrealistic to expect $100 per share next year.
The recent surge in the share price has been fuelled by HSBC's subsidiary Midland Bank reporting interim earnings growth of GBP385 million (about HK$4.34 billion) at the pre-tax level and net profit of GBP282 million.
The result caused excitement in Hong Kong and London, and HSBC's share price jumped a record $4 in one day.
Previously, Hong Kong companies have instituted share splits when the price has risen to dizzy heights because of the perception that cheaper shares were more attractive to local investors.
But if HSBC Holdings touches $100 per share, few analysts see a share split on the cards.
Banking analyst at Crosby Securities Roger Edgley believed the bank sees its US and UK shareholders as more important than those in Hong Kong. He said: ''The bank's institutional shareholder base is the predominant consideration. Penny stocks are frownedupon by US fund managers in particular.'' The only argument for a split would be to increase the liquidity in the bank's shares.
According to Mr Edgley, the bank will aim to keep its share price in the region of between US$15 and $50. He explained: ''It is all purely psychological. If Hong Kong shareholders feel a HK$100 stock is expensive they are mistaken. The number may look big, but it is only expensive or cheap in relation to its earnings. It is a good question, just what the bank will do, but I think a split is unlikely.'' Regional research director for Schroders Securities (Hong Kong) Nick Peacock said the time frame in which the increase could happen was still unclear, but it was on the cards. He said earnings per share for this year should be $8.18, rising to $9.80 for 1994.